The Myth of the Obama Cave-In

Without stimulus II it’s likely that the economy would have doomed President Obama’s re-election chances. With it a slow recovery took firm hold. Now we have a second chance to raise upper rates while continuing to relieve some of the middle class burden.

Why is this fair?

It’s simple math to me: high earners and the uber rich complaining about tax increases still don’t need at least two people in the family working full time to support their needs while pretty much everyone else in the US does. The GOP formula would cut Social Security by raising the retirement age once again, deal blows to medicare and medicaid, and attack Obamacare.

To me Obamacare is an essential program that plugs gaps for young entrants to the job market and also for our elderly. If you want to see Sarah’s Death panels, just watch what red state GOP legislatures are doing to health care for the elderly over the next decade to grandstand against Obamacare. This comes just as the largest segment of baby boomers begin to retire so I’m predicting elder flight from red states over the next decade.

The Republicans balked at that notion. They contended this would amount to a tax increase—if only on those in the upper brackets. They threatened to block any move to continue only the tax breaks for the middle. And with the filibuster in the Senate, they were positioned to do so. Moreover, they signaled they would fiercely attack Democrats who voted to extend only some of the tax cuts as tax hikers (though these Democrats would merely be supporting a return to the rates of the Clinton years). A game of chicken was on. Obama and the Democrats claimed the Republicans were holding tax cuts for the middle class hostage. (No tax breaks for the rich, then no tax breaks for anyone else.) And the GOPers were daring Obama to stick to his position, see all the tax cuts perish, and end up being blamed for a rise in taxes for everyone.

There was solidarity on the GOP side, but not among the Democrats. In the summer of 2010, as the midterms approached, several Democratic Senate candidates told Senate Majority Leader Harry Reid and the White House they preferred not to vote on any legislation that would keep only the middle-class tax cuts alive. They feared the GOP effort to brand them tax-raisers—which would be backed by unregulated special interest campaign cash unleashed by the Supreme Court’s Citizens United decision—would work. If there were a vote on decoupling the Bush taxes, White House aides figured, it was indeed possible that the president could not hold his side together.

Lawrence Summers, the head of Obama’s National Economic Council, fretted about a double-dip recession. In the White House, Obama and his aides gamed out various scenarios. With the economy sputtering in the second half of 2010, they worried that if the GOPers were hell-bent on winning this game of chicken, taxes would go up for all at the start of 2011—as unemployment benefits were ending (for the Republicans were blocking an extension of those, as well)—and this would lead to a decrease in consumer demand that would roil the fragile economy. Lawrence Summers, the head of Obama’s National Economic Council, fretted about a double-dip recession. Obama and his aides felt boxed in. The president had political promises to keep; he also had to prevent the economy from taking another downward turn.

In the fall of 2010—both before and after the midterm elections—Obama and his aides cooked up a different script.